Council wants to shrink budget

The City Council is considering cutting the city's budget by up to $10 million with an eye toward benefiting taxpayers. However, residents might likely not feel the impact directly through tax credits or decreases in their property tax rates.

Of the three options City Council members discussed at a meeting yesterday to help taxpayers, many favored reducing the city's debt, which they say will be the most beneficial for Oahu residents in the long run.

"You need to look at what will help taxpayers the most, and there's no absolute answer," said Council Budget Chairman Todd Apo. "Maybe working on reducing the debt is the way to go."

City Budget Director Mary Pat Waterhouse suggested using cash to buy large equipment, such as garbage trucks, a method used in the past so the city would not need to pay interest on these purchases.

"We think by using that money to buy equipment, we're not going to incur more debt," Waterhouse said. "During the tough years, the debt service cost will be less because of that."

During a time when the economy is slowing and gas prices are soaring, some councilmembers say taxpayers want to see instant relief. While the state warns of an upcoming grim economic time, the city is relatively fortunate for fiscal year 2009 with a slight increase in property tax revenue as compared with 2008.

Some City Council members say lowering the property tax rate would make it difficult to raise it in the future should property assessments drop. The city's major source of revenue is property taxes, with an estimated $788 million coming in for fiscal year 2009, according to Waterhouse.

"I would be totally against cutting tax rates," said Councilman Gary Okino. "It's very difficult to bring those tax rates up again. If you want to use the money for a tax credit, I think that's fine, too, but not incurring more debt is more prudent."

Reducing the tax rate by one penny would cost the city $1.4 million, Waterhouse said.

Apo said the budget will probably include at least a $100 tax credit for homeowners, as proposed by Mayor Mufi Hannemann.

There was at least one proposal to increase the credit to $200. The City Council is looking at cutting $5 million to $10 million from Hannemann's proposed budget, primarily in vacant positions.

Vacant funded positions have been an ongoing issue that comes up every year during city budget hearings. Department directors and supervisors want to keep the positions to hire employees quickly and as a cushion in case of any budget shortfalls.

City Council members say these positions remain vacant, some for many years, and do not see the justification for keeping all of the openings funded.

With an additional $5 million, the city could afford to give $36 more to each homeowner in a tax credit.

Councilman Nestor Garcia pointed out that this is an election year for some city officials, including himself, and said he prefers to apply the money to long-term solutions. "I want to make sure not to do short-term appeasements to win votes," Garcia said.

Councilwoman Ann Kobayashi noted that homeowners received a $200 tax credit last year, though property tax rates have not decreased. "I think we should go with whatever plan will help the taxpayer the most because they're facing higher gasoline and food costs," Kobayashi said.